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Breaking Down the Nasdaq 100 This Year - An Autopsy

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Thus far, 2001 has been like a train wreck for the technology sector. In true rubberneck form, let's slow down for a second and take a look at the extent of the carnage. Call it a morbid fascination, but new research from the Equity Derivatives Strategy Department at Merrill Lynch examines which companies are most responsible for dragging down the Nasdaq 100 index.

The index, which is tracked by the highly-popular QQQ exchange-traded fund (ETF), is comprised of the biggest companies traded on Nasdaq, and was launched in 1985. The chart below shows the performance of the index vs. the S&P 500 since April of 1994:


Source
: Nasdaq, Reuters

The Nasdaq 100 is down 27.3% year-to-date as of March 22, 2001.


Source
: Nasdaq

Only 21 companies in the index, just over one-fifth, had positive year-to-date performance numbers. Cisco was the largest contributor to the negative index performance, accounting for 3% of the 27.3% index decline.

Top 5 Negative Contributors to NASDAQ 100 YTD Performance
Company Ticker YTD return YTD return contribution
Cisco Systems CSCO -48.4% -3.01%
Oracle ORCL -46.7% -2.00%
Qualcomm QCOM -30.8% -1.46%
JDS Uniphase JDSU -39.0% -1.38%
Siebel Systems SEBL -53.0% -1.14%

Source: Merrill Lynch, YTD returns as of 3/22/01

As the table below demonstrates, how quickly the high-fliers of yesteryear can go down in flames.

Historical Annual Performance of 2001 'Drag Queens'
Company 1998 annual ret. 1999 annual ret. 2000 annual ret. 2001 YTD (3/22/01)
Cisco 66.5% 15.4% -64.3% -48.4%
Oracle 93.3% 159.9% -74.1% -46.7%
Qualcomm 2.6% 239.9% -53.3% -30.8%
JDs Uniphase 67.7% 132.5% -74.2% -39.0%
Siebel -18.8% 147.5% -19.5% -53.0%

Source: Reuters, Merrill Lynch

According to the CEO of the company at the top of the dubious list, things aren't going to turn around any time soon. John Chambers of Cisco today told Financial Times that he expects the market downturn to last for at least three quarters. The Merrill Lynch report is as of last Thursday's close - Cisco's stock has slipped $1.86, or 9.42% as of today's close, since then amidst rumors of further profit warnings.

The positive contributors to the Nasdaq 100 have been few and far between in 2001, but Microsoft and Dell have been the brightest spots. Microsoft is up 24.5% YTD, accounting for a 1.2% contribution to the index; Dell is up 50.5% so far this year, contributing 0.5% to the Nasdaq 100.